A Pittsburgh-area conservative think-tank is beginning to wonder if Pennsylvania’s gambling expansion will help fill state coffers, or if ongoing trends will ensure just the status quo is maintained.
The Allegheny Institute for Public Policy released a new policy briefing last week. It was penned by the institute’s president, Jake Haulk, and Senior Research Associate Frank Gamrat.
In the briefing, Haulk and Gamrat outline how 2017 gaming revenues were up only slightly over 2016 numbers. Plus, the increase actually led to a decrease in state tax collected.
The increase in overall gaming revenues was led by an increase in table game revenues. This offset a small decline in slot machine revenues. However, it all led to a drop in state tax receipts from casino gaming.
Pennsylvania Gaming Control Board figures show table game revenues in the state rose 4.4 percent over 2016, from $853.2 million to $890.6 million. They also show a one percent drop in slot machine revenues, from $2.36 billion in 2016 to $2.33 billion last year, a decrease of almost $24 million.
Revenues up, taxes down
Table game revenues are taxed at a 16 percent rate in PA Slots at 54 percent. As a result, the increase in overall gaming revenue still meant a decrease for the state’s end.
In fact, the $24 million drop in slot machine revenues meant the state collected $13 million less in taxes. Of course, the rise in table game revenues brought the state $6 million more in taxes than it had collected in 2016. However, it still left state tax receipts from casino gaming $7 million short of 2016 figures.
Haulk and Gamrat say the numbers can be deceiving:
“At first glance, the ongoing increase in table game revenues gives the impression that the gaming industry in Pennsylvania is doing very well. But if the year-to-year growth trend continues its declining path, it will not bode well for the state’s reliance on those games to produce increasing tax revenue.”
Table games up, slots down
Plus, Haulk and Gamrat say the situation is getting worse every year.
The pair point out that the number of slot machines operating in PA is down 2.2 percent since 2012. Additionally, gross revenue per machine has fallen from a high of $7,753 in 2012 to $7,497 last year. That’s $256 per machine, representing a 3.3-percent dip.
In the meantime, the number of table games available is climbing. In 2013, the average monthly number of table games hit 1,058. Last year it was 1,243. Plus, the revenue per table has stayed relatively flat. It went from $59,610 in 2015 to $59,737 in 2017.
In October 2017, the state legislature passed new gaming laws. This included several expansion initiatives, including internet gambling and the authorization of up to 10 satellite casinos.
Each can operate from 300 to 750 machines and up to 40 table games. Two licenses have already been won through the bidding process, including one from Hollywood Casino owner and operator Penn National Gaming.
Should all 10 satellite casinos open, it could add another 7,500 slots and 400 table games to the state’s total.
Will gambling expansion help?
However, Haulk and Gamrat wonder if the increased number of games will actually boost tax revenues from gaming, considering recent trends.
“The question is whether or not the increase will be substantial or merely incremental and whether any upturn can be sustained. Clearly, the question of “saturation” needs to be answered. Can Pennsylvania’s population and economy support in a profitable manner 22 casinos, gaming in airports, truck-stops and on the internet?”
Haulk and Gamrat conclude saying that economic reliance on gaming can be very risky. Particularly with all the competition surrounding the state.
They say the majority of casino gaming revenue is money Pennsylvanians would otherwise be spending on other recreational pursuits, luxuries or even necessities.
Plus, while casinos create jobs, they claim they cannot replace manufacturing and gas industry jobs in terms of total boost for the local economy.
Finally, Haulk and Gamrat suggest gambling expansion is a poor economic stimulus substitute for creating a friendlier business climate that attracts manufacturing firms or encourages companies already operating in the state to expand.